Value Engineering (Miles and Erlicher)
Systematically optimizing the functions and value of goods or services. Explanation of Value Engineering of Lawrence D. (Larry) Miles and Harry Erlicher. (1947)
Contributed by: Mohamed A. Tantawy MBA AVS
What is Value Engineering? Description
The Value Engineering method from Miles and Erlicher is a function-oriented, systematic team approach used to analyze and improve the value in a product, facility design, system or service. It is a powerful methodology for solving problems and/or reducing costs while improving performance/quality requirements. Value, as defined, is the ratio of Function to Cost, and can therefore be increased by either improving the function or by reducing the cost.
The terms Value Engineering (VE), Value Analysis (VA) and
Value Management (VM) are used synonymously and interchangeably by
some people. The approach is sometimes also referred to as Value Control,
Value Improvement or Value Assurance.
Origin of Value Engineering. History
VE was developed in 1947 just after World War II at the General Electric Company when a shortage of material and labors affected GE production. Lawrence Miles was asked to explore why this occurred, and how cost reduction and performance improvement could be achieved.
Costs in Value Engineering
Note that when value engineers talk about reducing costs, they could be referring to either total life cycle costs or the direct costs of production. Total life cycle costs are the total expenditures over the whole life span of the product. This measure of cost is most applicable to expensive capital equipment, and includes manufacturing costs, installation costs, maintenance costs, and decommissioning costs. Individual expenditures must be discounted to reflect the time value of money. When referring to consumer products, the direct cost of production is more typically used. This measure is limited to the costs directly associated with manufacturing the product.
Usage of Value Engineering. Applications
Areas in which VE can be efficiently and profitably utilized are:
Steps in Value Engineering. Process
The common terminology offers a standardized step by step Job Plan of the systematic problem solving process and consists of four major phases:
Strengths of Value Engineering. Benefits
Limitations of Value Engineering. Disadvantages
Assumptions of Value Engineering. Conditions
Cost cutting alone is not the main function or objective. Neither is improvement alone.
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